Daimler AG v. Bauman, 571 U.S. —, 134 S.Ct. 746 (2014).
In Daimler, the U.S. Supreme Court significantly limited the states in which a multi-state or multi-national company may be sued for a claim that is not related to the company’s activities in that state. Unless the conduct complained of occurred there, a plaintiff can only sue a corporation where the corporation is “at home.” What this means is that substantial contacts, control over operations of a branch, or being licensed to do business in a state does not mean that the company can be sued in that state. In all but exceptional cases, “at home” means the state where the company is incorporated or has its principal place of business.
For example, if a plaintiff is injured by a product in State A (or overseas), the plaintiff will no longer be able to sue a foreign manufacturer in State B just because the manufacturer sells some of its products in State B or conducts substantial business in State B if the product at issue in the lawsuit was not sold or manufactured in State B. If the manufacturer is not incorporated in or does not have its principal place of business in State B, then Daimler dictates that subject to few exceptions, the manufacturer cannot be sued there because State B will not have personal jurisdiction over the manufacturer.
This decision will apply in federal and state courts and will affect where mass tort and products liability cases can be litigated.
Daimler is a German company that manufactures Mercedes-Benz vehicles in Germany and is headquartered in Stuttgart, Germany. A group of over twenty Argentine plaintiffs sued Daimler in the Northern District of California, alleging that Daimler was vicariously liable for the actions of its subsidiary in Argentina (Mercedes-Benz Argentina). All actions complained of occurred in Argentina.
Plaintiffs maintained that jurisdiction was proper over Daimler because Mercedes-Benz USA—an indirect subsidiary of Daimler incorporated in Delaware with its principal place of business is in New Jersey—had sufficient contacts with California to establish general jurisdiction over Daimler. Mercedes-Benz USA (a) has multiple California-based facilities (including a Regional Office, Vehicle Preparation Center, and Classic Center), (b) is the largest supplier of luxury vehicles to the California market, and (c) has sizeable sales (hundreds of billions) in California, accounting for 10% of its sales and 2.4% of Daimler’s worldwide sales.
The District Court disagreed with the plaintiffs and dismissed the case for lack of personal jurisdiction. The Ninth Circuit disagreed with the trial court and determined that the court had personal jurisdiction. The Supreme Court granted certiorari.
Whether it is inconsistent with the Due Process Clause of the Fourteenth Amendment for Daimler to be subjected to suit in California courts for claims involving only foreign plaintiffs and conduct occurring entirely abroad?
Yes. Justice Ginsberg delivered the unanimous opinion reversing the Ninth Circuit. Justice Sotomayor filed an opinion concurring in the judgment only. The Court held that because Daimler’s “slim contacts” with the State hardly render it at home in California, there is no basis to subject Daimler to general jurisdiction in California.
The Court ruled that a plaintiff must show substantially more than a foreign corporation’s “continuous and systematic” in-forum contacts for a court to have general jurisdiction over that corporation. Id. at 761. Rather, the Court explained that general jurisdiction over a foreign corporation accords with the due process only if “that corporation’s ‘affiliations with the State are so continuous and systematic as to render [it] essentially at home in the forum State.'” Id. (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. —, 131 S.Ct. 2846, 2851 (2011) (unanimous opinion also delivered by Justice Ginsberg)). The Court equated being “at home” for a corporation as (i) incorporation there, or (ii) the presence of the corporation’s principal place of business there. Id . at 760.
The Court further instructed that the exercise of general jurisdiction “calls for an appraisal of a corporation’s activities in their entirety, nationwide and worldwide.” Id. at 762 n.20. If a corporation has substantial contacts in a foreign state or country, those foreign contacts weigh heavily against the exercise of general jurisdiction in the forum state because “[a] corporation that operates in many places can scarcely be deemed at home in all of them.” Id. Thus, in Daimler, the Court held that California could not exercise general jurisdiction over the defendant despite the fact that the corporation had seemingly substantial contacts with California. Id. at 760. The Court concluded that there simply was no basis:
Even if we were to assume that [Daimler’s USA subsidiary] is at home in California, and further to assume [the subsidiary]’s contacts are imputable to Daimler, there would still be no basis to subject Daimler to general jurisdiction in California, for Daimler’s slim contacts with the State hardly render it at home there.
Id. at 760.